"I am proposing that we change and increase the basic housing allowance," Cohen said. Currently service members living off base must by law pay at least 15 percent of their housing costs out of pocket. Because of budget constraints, however, they often pay up to 19 percent.

Cohen proposed cutting these out-of-pocket expenses to 15 percent in the fiscal 2001 defense budget and gradually reducing them to zero by 2005. He said DoD is willing to allocate roughly $3 billion of a $112 billion requested budget increase over the next five years to accomplish this.

The proposed increase to the basic allowance for housing will eliminate this inequity, Cohen said. "On one hand, if you're on base, your housing and your utilities are all paid for," he said. "On the other hand, if you're off base, you pick up 15 percent at a minimum, and as much as 19 percent currently. We've got a real disparity there."

Defense officials hope raising BAH will have a three-fold effect on the overall problem of inadequate housing. First is the immediate boost to service members' pay. Officials predict the average E-6 will receive about $175 more a month in BAH by 2005, while the average E-4 will receive about $111 more, allowing them to seek better housing options.

Second is the effect defense officials hope this plan will have on the military housing privatization initiative. Congress authorized the privatization program in 1997. Under it, private developers provide and maintain housing for service members in exchange for housing allowances.

"There are a lot of costs associated with keeping people on base, a lot of infrastructure involved," said Randall Yim, deputy undersecretary of defense for installation support. The average age of on-base housing units is more than 35 years, Yim said. These units are approaching the end of their useful life. It's easy to see why it's necessary to focus on quality housing issues, he said.

Yim estimated it would cost $20 billion to bring all the current military housing up to current suitability standards and take up until perhaps 2050 to complete. "What we really want to do, since we obviously can't afford this bill, is bring privatization on line," he said. "But this increase in the housing allowance won't do it alone," Yim said. "We need Congress to support us on a fairly aggressive housing privatization program."

The success of privatization lies in maintenance, not in the initial construction. "The key is that the income stream from the better BAH rates will be there for the private sector to fund repairs and renovations over the life of the housing," he said. "Are they going to keep up the painting and the plumbing and the day-to-day maintenance so the place doesn't deteriorate in 10 years?"

Lackland Air Force Base, Texas, and the Army's Fort Carson, Colo., have already initiated privatization projects with promising results, Yim said. "And at Camp Pendleton there's a solicitation on the street right now for a housing privatization project of about 512 units," he added.

Yet, Yim said, there are still some doubts in Congress. "There were a lot of concerns about the pace of privatization," he said. "The Army, for example, went to a very aggressive privatization schedule, and some in Congress said, 'Perhaps you're going too fast. You need to get some more data about whether this really works or not.'

"I think this will send a very clear message to Congress that we're serious about this," he added. "We need their support on privatization."

Cohen and Yim said they hope increased privatization will also take some of the pressure off traditional military construction funds. So, the third benefit of this plan is that it will allow the military to better maintain those housing units it does still control.

This way, the plan will also have a positive impact on service members stationed overseas, who don't receive BAH but an overseas housing allowance. "They'll benefit indirectly through better family housing and barracks," Yim said.

DoD, Cohen insisted, is not trying to get out of the housing business. "We want to get out of the business of managing housing," he said.

"The long-range goal is to get our housing deficiencies corrected," Cohen said. His goal is to correct deficiencies in barracks for single service members by 2008 and in family housing units by 2010.

The secretary told the group of Marines he sees fixing housing as a retention issue. "We know we've got to work harder and smarter, and that's what we're in the process of doing," he said. "This is something I will fight very hard to get through Congress. That's just one of the things we can do to make certain the quality of life we offer to you is adequate to keep you."

Another priority is to improve health care. Cohen told reporters he will have a major announcement about military health care soon.

"We can't have the best military in the world if we can't keep the quality of people that you represent," he told the Marines.